Import firms at receiving end

While the falling value of Indian rupee has benefitted the outsourcing firms, import-oriented industries such as IT hardware business, electronics and auto-component manufacturing units have been on the receiving end since they have to make payments to their offshore suppliers in US dollars.

While the falling value of Indian rupee has benefitted the outsourcing firms, import-oriented industries such as IT hardware business, electronics and auto-component manufacturing units have been on the receiving end since they have to make payments to their offshore suppliers in US dollars.

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Sanjeev Dutt, CEO of eFlex IT Solutions limited, said strengthening of the US dollar has affected his business adversely. “In order to deliver the services, most of the inputs and consumables such as hardware, IT infrastructure, peripherals and essential inputs like raw materials are imported. Hence, the cost of all three bottom-line inputs — man, machinery and money — are moving upwards, which in effect is lowering the margins and profitability,” he said.

The promoter of a large IT hardware firm in Udyog Vihar, who didn’t wish to be named, said “We majorly import our components from China and other countries. Since we pay them in US dollars, the depreciating value of the Indian rupee is putting an extra strain on our cost.” Some firms say that the situation has had the twin effect on their business. “While it has helped earn better from our exports, we also import raw materials from abroad for which we pay in dollars,” said Sanjay Kalra, promoter of a city-based garment export firm Sanya International.

“This is short-term gain. Besides, we also import components where we have to shell out more money to suppliers who are paid in US dollars.”